Fannie Mae-No Politics (FNMA)

[kthomp19]

It's why the govrats have avoided owning Common to date. They don't want it on the books.

Converting the seniors and exercising warrants changes the accounting and makes the GSEs official property of the US govt until such time they can offload all those shares.

Wrong.

There are two types of Reporting Entities in Appendix A of the Financial Report of the US Government (page 212): Consolidation Entities (those whose balance sheets are consolidated onto the government's) and Disclosure Entities (whose balance sheets are not consolidated).

Fannie and Freddie are listed as Disclosure Entities because of SFFAS No. 47, item 42 on page 15:

Entities for which the relationship with the federal government is not expected to be
permanent, such as receiverships, conservatorships, and other intervention actions, would
be less likely to meet these characteristics as a whole. Such entities generally would not be
classified as consolidation entities.

Since Treasury does not expect the conservatorships to be permanent, they can avoid consolidating FnF's balance sheets onto the government's. This has absolutely nothing to do with how many common shares Treasury owns. FnF have been under government control since 2008 so the control aspect by itself does not trigger consolidation.

In addition, Treasury owned 92% of AIG common stock at one point and never included AIG as a Consolidation Entity in their 2009, 2010, 2011, or 2012 reports. You can check past reports on this page.

Each report is as of September 30, and according to Treasury's history of AIG common stock ownership and sales they still held 1.45B of its original 1.65B common shares (about an 81% stake when prorated) on September 30 2011. That means even the 79.9% threshold was meaningless when it comes to consolidation.

Those who think the SPS conversion is coming and Treasury will own 99.9% of the GSEs - why? Other than it fits the Preferred fantasy....

Those who think the SPS writedown is coming and Treasury will give up equity they value at $220B for nothing in return - why? Other than it fits the Common fantasy....